The National Securities and Stock Market Commission (НКЦПФР) proposes developing the issuance of municipal bonds to attract investment into energy resilience projects for Ukrainian communities. A bond is a debt security that gives the issuer money now and requires repayment to the investor with interest.
What communities can use the raised funds for
НКЦПФР notes that one priority for funds raised through municipal bonds could be ensuring cities’ energy resilience: development of distributed generation, installation of cogeneration units, modernisation of energy infrastructure and other projects to ensure the uninterrupted operation of hospitals, schools, transport and municipal utilities. Municipal bonds are considered an additional source of financing alongside budget funds, loans and international assistance.
The mechanism foresees the issuance of local loan bonds through which investors provide funds to the community, and the community undertakes to repay them according to the terms of the issue. НКЦПФР emphasises that use of this instrument requires responsible financial planning: each project must have an economically justified model and take into account the budget’s debt burden and conditions for potential investors.
Simplifying issuance and registration procedures
The regulator is holding consultations with territorial communities, the relevant committee of the Verkhovna Rada, the Ministry of Finance and other stakeholders to develop this area. One practical task for НКЦПФР is to simplify procedures for issuing and registering municipal bonds.
The Commission has optimised certain regulatory procedures: it has provided for the possibility of electronic submission of documents and shortened the timeframes for completing key registration stages to reduce the administrative burden on local government bodies and make the instrument more accessible to communities.
Preparing investment projects and the role of the capital market
The next stage is for communities to prepare investment projects that comply with legislation and have a justified financial model. This requires coordination between local self-government bodies, the Ministry of Finance, the regulator and potential market participants.
НКЦПФР views the development of municipal bonds as part of the task of directing capital market resources towards infrastructure recovery and strengthening communities’ resilience. For potential investors, this implies clear issuance conditions and economically justified projects to which funds will be allocated.
